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CONVENIENCE AND ITS COSTS

Published by sam - 17/09/07 - 10:09:05 am

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A major convenience of a charge card is that it allows you to buy merchandise, meals, and even theatre without carrying a substantial amount of cash in your wallet or purse.  The cash you would otherwise have to carry would be subject to theft or loss.  Even if it were not lost or stolen, it would lose the interest it could be earning in a savings account until your monthly payment is due.

Merchants who might balk at accepting your personal check have no hesitation about allowing you to use your charge card, thus giving you at least two or three weeks before you have to pay for you purchase.  Charge cards can also permit you to take advantage of special sales that you encounter when your checking balance is low or you are not carrying enough cash.

Charge cards are specially useful in expediting a purchase by mail.  Instead of mailing a check for a catalog item, you can usually reduce effort and delay by using a toll-free telephone number and paying for your purchase with your card.  In addition, ordering by card rather than by check expedites refunds for unsatisfactory merchandise and provides you with effective recourse against non delivery or defective merchandise.

Charge cards can also serve as proof of identity and, to some extent, of financial stability, in check cashing and other transactions.  Renting an automobile without a card is extremely difficult often impossible.

A charge card is also convenient if you travel frequently—not only because it permits you to carry less cash but also because it enables you to guarantee hotel reservations for late arrival.  It is especially useful when you travel abroad, because it reduces the sum you need in travelers check (which you pay for in advance), as well as your need to make frequent currency exchanges—sometimes at unfavorable rates. Because the card issuer makes such exchanges in very large amounts, your charges in other currencies are generally converted to dollars at the wholesale rather than the retail exchange rate –although this advantage depends on some extent on the stability of the U.S. Dollar against a specific foreign currency.

Charge cards do not offer you all these conveniences for free.  In addition to the interest charges and annual fee on most major charge cards, there maybe hidden costs that some card holders fail to recognize.  Since the bank handling each merchants account collects a commission of 3 to 5 percent for processing each card transaction, charge card have a broadly inflationary effect, raising prices because merchants must compensate for this commission.  As a consequence, many items may be priced lower in shops that do not accept plastic, and if u need fairly costly item, you should forgo the convenience of credit for the sake of a substantial price difference.

This principle is also applicable to routine purchase.  When, for example, a service station offers a four cents per gallon price reduction to cash customers, the use of a charge card is rather extravagant convenience.  Another strategy to consider when buying a high ticket item such as television set or a refrigerator from a merchant who accept charge cards would be to negotiate a discount ( 3 to 5 percent ) by offering to pay by check instead of by card.  This transaction costs the retailer nothing but you with a substantial saving.

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